Fate of Fiat Chrysler's Detroit plant in city’s hands
Detroit — The clock is ticking for the city to put together a deal in the next month that will usher in the first new automotive plant here in 30 years.
The plan involves acquiring 200 acres of land, closing a street and demolishing an old power plant to make way for the proposed Fiat Chrysler Automobiles NV's Mack Avenue Assembly Complex on the city’s east side.
The city must complete several steps by April 27, which will mark the end of a 60-day period since the city first announced the proposed deal and signed a memorandum of understanding with the automaker.
Fiat Chrysler plans to invest $1.6 billion in expanding its Mack Avenue facilities with a new plant and investing $900 million to modernize its Jefferson North Assembly Plant. The investment will bring about a total of 5,000 new jobs to the city and gives the automaker the ability to build the next-generation Jeep Grand Cherokee, as well as new three-row and plug-in hybrid versions of the highly profitable SUV.
According to the memorandum of understanding between the city of Detroit and FCA, the city must identify and schedule closing dates for 200 acres for the development by the end of April.
Within three business days of the April 27 deadline, the city must submit to the Detroit City Council a development agreement signed by Detroit Brownfield Redevelopment Authority and FCA. The city also has to complete a community benefits agreement to provide for residents. Benefits for other large projects in the city have included neighborhood and park improvements, scholarships, affordable housing and workforce training.
The city also must complete the process for a tax abatement agreement expected to be worth $12 million to FCA over 12 years. And it must remove a berm west of the Mack Plant between East Warren and Mack within 15 days of the deadline.
John George, a Detroit Brownfield Redevelopment Authority board member, said the project has a lot of moving parts and a short window of time to pull off the deal. Despite that, he said he's optimistic.
"This kind of project — if it was easy, everybody'd be doing it," he said. "It's not very often Detroit, or any city for that matter, especially rust belt cities would have this kind of an opportunity. We're going to do whatever we can on our end to support this. But, of course, there are some speed bumps that we've got to get over or around."
The majority of land needed — 170 acres — is owned by three entities: the city of Detroit, DTE Energy Co. and the Moroun family. DTE Energy officials say they are working on a land swap agreement with the city, while representatives for the Morouns have not commented on the deal. The city has not disclosed the potential parcels it seeks that could make up the additional 30 acres.
In a letter shortly after the announcement, Kevin Johnson, president and CEO of the Detroit Economic Growth Corp., said his team had been working with the city for several months on the plan. DEGC officials have declined requests for an interview, referring calls to the city of Detroit.
But Johnson wrote in a letter to the public that delivering the 200 acres is critical.
"Without the power of eminent domain, and without a large cash reserve, our options for land assembly are limited," Johnson said. "This underscores the difficulty of developing urban areas for major manufacturing sites."
While difficult, is it nearly impossible?
Acquiring the land needed can be done under certain conditions, says John Mogk, a law professor at Wayne State University who is not connected to the project.
“Assembling the remaining 30 acres from a number of lot owners, some of whom may be professional and seasoned speculators, may be difficult,” Mogk said. “However, speculators are in the business to make windfall profits and, if the city is willing to pay prices that far exceed fair market values to holdouts, the site should be able to be assembled. It is all about the money.”
Mogk said that one way for this to be accomplished within a short period of time is if title work was done prior to the announcement.
"You couldn’t possibly do all the title work, identify the owners and make offers and complete the transition in 60 days for 30 acres, scattered site holdings unless you got started before the 60 days," he said.
The city has not spoken about its progress in acquiring another 30 acres in the area, nor the parcels it seeks. City officials have said no homes, businesses or churches would be acquired for the project.
City officials have said the boundaries for the development have not been set pending land acquisition. However, Mayor Mike Duggan gave a glimpse of the general area of the development earlier this month during his State of the City address.
Duggan said the city approached then-FCA chief executive officer, the late Sergio Marchionne, when it learned that the automaker had plans to build a new plant to build Jeeps.
"We went to Chrysler and said we want to pitch you on putting a plant in the city of Detroit," he said. "And we showed them the map. And Sergio Marchionne, a great man, said to me you don't have any place to put us. I said all we want is a chance to pitch. And we tragically lost Sergio, but his successor, Mike Manley, kept that commitment. They said we'll give you a chance to pitch."
The plan shows the proposed complex sitting on existing FCA-owned land in the area of East Warren and Mack, just east of St. Jean. Other portions of the project are bordered by Mack to the north, Jefferson to the south, Conner to the east and St. Jean to the west. About half a mile south, a piece of land for the project is roughly bordered by Freud to the north, Lycaste to the west, Clairpointe to the east and the Detroit River to the south.
Getting the pieces in place
The groundwork for the project was laid this past fall when the Detroit Brownfield Redevelopment Authority board approved initial steps in the city of Detroit’s request for assistance in assembling land to establish market-ready industrial sites in the city. The authority received $10 million in initial funds from the city from its 2014 bankruptcy exit funds to acquire properties and conduct environmental testing.
“Sometime last year, the mayor was interested in land assembly for these kinds of projects to become reality,” George said. “Just in general. It obviously made sense as a city to get our ducks in a row and even have a possibility of something like this. When’s the last time 5,000 automotive jobs came to the state?”
In October and November, the board approved working on a land assembly project.
“The biggest problem when these opportunities arise is having the acreage to even consider it so we have been working closely with the city of Detroit Mayor’s office to do whatever we can do as a board to help assemble land and have the testing done so that if an opportunity arose there would be a possibility,” George said.
The city has said the use for the additional land will include employee parking, trailer marshaling and storage for finished vehicles.
FCA officials say it chose Detroit because of its close proximity to suppliers and other FCA component facilities, such as stamping and engine plants. The automaker is expanding its Jeep brand with the facility.
"This company decided to put, and smartly, decided to put the plant here in Detroit," said Ron Stallworth, an external affairs manager for FCA, during a recent community benefits meeting with residents and plant workers. "The reason why is because of you guys that work at this plant. It's the quality of the workforce and the quality of the product that's produced."
The city has to deliver a community benefits agreement to the Detroit City Council within three business days of the deadline.
The scale of the project means it falls under the community benefits ordinance, which includes the establishment of a Neighborhood Advisory Council and a series of community meetings.
The FCA project has one of the shortest turnarounds so far with five weeks of meetings scheduled.
Following a packed first meeting last week, residents were given a second opportunity the following night to learn about the community benefits process and volunteer on the council. The community was expected to select two members for a nine-member board on Wednesday. This will be followed by the City Council appointing three residents and the planning department appointing four members.
The city says its goal is to have a community benefits agreement before Detroit City Council by April 12.
Residents raised numerous concerns during the first community benefits meeting, giving a glimpse into what topics the Neighborhood Advisory Council might want addressed. Issues included the St. Jean closure, environmental impacts, truck traffic as well as job training and employment for area residents.
"The key is making sure we get the right people on the (Neighborhood Advisory Council) who are committed to negotiating with Chrysler and get this done," said Detroit City Councilman Andre Spivey, whose district will include the plant expansion. "... For the most part, we've gotten some good feedback from the community. Any time you have a major project, there's always some apprehension and concern."
Among the concerned residents was Bessie Cox, who lives on Lillibridge between Canfield and Warren.
She said her block is in such poor shape, she was hoping FCA would want to buy her house. She said there are about eight livable homes left on her block.
"The block has deteriorated so bad," she said. "It's sad. They can have mine if they want. I think everybody around there would (move)."
Donna Givens, president of nonprofit Eastside Community Network near the proposed development, said she'd like to see residents in the community have access to the new jobs.
"We want to make sure that we use this as an opportunity to do things the right way with respect to all the sustainability issues that happen inside of a community and that is environmental protection, storm water drainage ... as well as air quality," she said. "This is an opportunity to catalyze other strategic investments if we work closely together."
'Well down the path'
Additional land needed for the deal includes the site of a former manufacturing plant at the corner of Conner and Mack as well as DTE Energy's old Conners Creek power plant site between Jefferson Avenue and the Detroit River.
The city is pursuing a land swap deal with DTE Energy for its Conners Creek power plant, which ceased operation in 2008.
“We were in the process of exploring what we could do with that property,” said David Meador, vice chairman and chief administrative officer for DTE Energy. “Our pattern is if we have an excess piece of property or facility like this, we usually have a bias toward development in a way that can be a catalyst for the neighborhood, economic development and growth and jobs."
The utility will swap 50 acres of its 75-acre land at the power plant site with eight to 10 pieces of property that are comparable in value, Meador said. It plans to use the land for uses like service centers for gas utility or land for substations.
Officials for the utility said it expects to complete the transaction in the near future.
“We’re well down the path,” Meador said.
DTE Energy will begin to demolish the old power plant this summer.
The utility says it is working with national demolition experts to determine the most effective and safe way to bring down the structures while minimizing disruption to the neighborhood. It expects to create a plan in the coming months.
Another large portion of the land needed for the development is an 83.37-acre manufacturing site at 12141 Charlevoix, tied to Moroun-owned company, Crown Enterprises.
Closing a road
About 50 acres of the site will come from the closure of St. Jean Street from East Warren to Mack and from Mack to Kercheval. Mack will remain open.
Following the announcement of the proposed plant expansion, the city began work to remove the berm along St. Jean in anticipation of the street closure.
“In this particular case with all the expansion work that’s going to be going on at the Chrysler site, a space they were currently utilizing for parking is now going to be utilized for other purposes,” said Ron Brundidge, director of the Department of Public Works. “The newly vacated portion of St. Jean, when it’s vacated, is going to be needed because they’ll need to utilize that space for employee parking.”
Various city departments, including the Detroit Department of Transportation, the Detroit Police Department the Detroit Water and Sewerage, will weigh in on the petition for the street closure.
Utilities including DTE Energy, AT&T and Comcast will also give feedback. The closure will ultimately go before City Council for approval. The goal is to have a resolution for the closure before council by the end of April, Brundidge said.
The city will conduct a detailed traffic study on how traffic currently accesses St. Jean. If approved, FCA will be responsible for physically closing the street, with a gate or other barrier preventing public vehicles from continuing to access that stretch of St. Jean.
“This is obviously pretty exciting the prospect of bringing in thousands of new jobs to the city,” Brundidge said. “The closing of a major road such as St. Jean is not something that we enter into lightly."